You Can Plan to Avoid a Crisis
By Craig Watson, Texoma LIVING WELL Magazine
Estate planning starts with a goal. What are your goals? Is your goal to preserve assets for the security of you and/or your spouse and leave an inheritance for your family?
What are the greatest threats to this goal? Taxes are not a concern for most people. For at least the next year, estate taxes will generally be due only from people who own over $5 million at death. Likewise, doctor and hospital bills are not a threat because Medicare covers most seniors.
The greatest threat to the financial security of most families is the cost of long-term care. Most nursing homes in this area charge over $4,000 per month. These costs are increasing at approximately 7% per year. Most families do not have enough income to pay for nursing home costs without liquidating their savings.
Medicaid pays for 70% to 80% of all residents in any given nursing home. These residents either qualified for Medicaid because they spent all of their assets or because they were able to plan in advance to protect their assets from nursing home costs. Federal law requires that a person on Medicaid must receive the same level of care as a person who is paying privately.
Preserving assets makes sense for other reasons. If a person chooses to spend all of their assets on nursing home care and then qualifies for Medicaid, they will have nothing left for any “extras.” For example, Medicaid often won’t pay for items such as dentures, eyeglasses and hearing aids. Other quality of life services such as a telephone may not be included. Finally, we all know someone who loves to have his or her hair or nails done once a week. If a person on Medicaid needs something that is not covered, he or she either does without, or relies on children to pay for whatever is needed. Adult children often have no extra funds to pay for the needed service. However, if some advance planning is accomplished to preserve assets, the adult children will have access to assets to pay for those extra services that may allow Mom or Dad to experience a higher quality of life during their last years.
And why not plan? Congress is deemed to know the effect of the laws that it passes. Any “loopholes” are theoretically left in the law intentionally. No one fails to take advantage of an income tax deduction when they are completing their tax return. Similarly, no one should fail to take advantage of a “loophole” left in the law by Congress that might help their family preserve some assets and qualify for Medicaid sooner than if no planning had been undertaken.
No one wants to admit that they might end up in a nursing home someday. However, it can happen suddenly, such as in the case of a sudden stroke or fall. Or it can result from a relatively slow disease process such as Alzheimer’s.
Until recently, it has been possible for someone to deny that a medical crisis could ever happen in their life, undertake no advance planning, experience a sudden health crisis, enter a nursing home and then send their family to see an elder law attorney and still successfully protect their house and a substantial portion of their liquid assets. However, government recently enacted changes that will make it more difficult to successfully preserve assets if one waits for a crisis. Advance planning is now the key to long-term financial security.
Due to these changes, it has become crucial for people desiring to preserve assets for their spouse and children to plan far in advance of the date they may someday enter a nursing home. In many cases, it will be possible for someone to plan in advance and maintain control, yet preserve their home and savings for their own use, their spouse’s use and then to be inherited by their kids. In conclusion, don’t deny that you might need long-term care. Instead, make sure your estate is protected from that threat. Those who plan in advance will accomplish their goals, even if they experience a long-term care crisis.
Craig Watson’s legal practice is focused on estate and tax planning, probate, guardianships, elder law and corporate law. Formerly a CPA, he has 24 years of experience as an attorney. He can be reached by calling 903-813-8500 or at craigwatsonlaw.com.